34th Annual General Meeting of BEPL providing yearly Guidance and strong Growth story

Description:

The company gained NUMERO UNO position in India in terms of manufacturing / production of ABS polymers and continues to maintain the same. Also company commands status of a leading supplier also in the polymers segment and has created a strong hold in catering the requirements of majorly automobile and consumable segments inter alia others. The company makes constant efforts to improve upon its application, expertise, research and product portfolios with the available technical capabilities to create unique and matchless footprint in its business arena in the years to come.

Post operationalization of the In-House state of the Art - R&D facility as undertaken by the management at its Abu Road plant, the company will be in a position to expeditiously execute application development works and gain market share.

The JV entity viz. M/s Bhansali Nippon A & L Private Limited established by the company in partnership with M/s Nippon A & L INC, Japan in May 2013 has started yielding positive operational results. The JV company is past its breakeven point and is likely to achieve substantial growth going forward.

Review of Financial Performance:

The Gross turnover of the company amounted to Rs.1204.55 Crore in the Fiscal 2018 as against Rs.704.09 Crore in the last fiscal witnessing an impressive growth of around 71%. The Profit before Tax (PBT) rose to Rs.154.31 Crore as against Rs.56.73 Crore during last fiscal reflecting a notable uptick of about 172%. Likewise the Profit After Tax (PAT) also raised to Rs.99.41 Crore in F.Y. 2017-18 as against Rs.35.07 Crore during last fiscal depicting a remarkable upsurge of about 183%.

As far as financials of JV entity is concerned, the turnover stood at Rs. 2.58 Crore during F.Y.2017-18 as against Rs.1.27 Crore during last fiscal witnessing an impressive growth of around 103%. The business expenditure incurred during Fiscal - 2018 amounted to Rs. 1.80 Crore as against Rs. 1.63 Crore last fiscal and the Net Profit was Rs.0.77 Crore as against loss of Rs. 0.35 Crore during last fiscal which when added to the accumulated losses of Rs. 2.51 Crore incurred upto last fiscal, led it to reduce its total accumulated loss to the extent of Rs. 1.73 Crore.

Discussion by the Management in 34th AGM:

- 137000 TPA will be achieved by March 2019 and for FY19 the output will be 75000 TPA and for next year F.Y.20 minimum they will achieve output of 100000 TPA and maximum around 120000 TPA.

General grades and speciality grade should be in balance and thus for achieving 137 ktpa by March 2019 they have to shutdown plant in between resulting in capacity utilization of around 75% for F.Y.19

Value wise they sell ABS between Rs.150 to Rs.400 per kg ranging from normal grade to specialty grade. They have around 100 to 150 grades and each grade have approx. 2000 colors so once a customer is tied up, customer don't go to other player for purchase, so the idea is to produce a balance between normal and specialty grade to gain maximized profits and market share at the same time.

Out of the total capacity to be added by March 2022 i.e 337000 TPA around 200000 TPA will be of specialty grade.

The research center will be operational in a day or two and they have good researchers from the JV entity & industry there to identify new application with specialty grades so that the company can tap customer for those grades. As rightly mentioned by Mr. Babulal Bhansali that for us cost will be same for raw material imported, but will try to maximize profits from specialty grade. Also he shared the fact that earlier there were 4 players in this business and Mr. Babulal Bhansali took over two companies in the past whose results can be seen now with their plants used for increasing the current capacity from 80ktpa to 137ktpa. These companies worth 500 crores were purchased for just Rs.11 crores and the EVA that the plant is adding now is like cost free to the company.

Also he mentioned that ABS have no link to rising crude price, the only impact is from the price prevailing in the market due to demand and supply gap and 80% of the raw material is imported.

Also they don't not have any hedging policy for raw material import bills as they claim that it is on 90 days period and we have pricing formula based on 90 days period in which 50-60% of the contract is covered where the price fluctuation is passed on the customers and rest 50% is exposed to dollar fluctuation, and for hedging we need to pay 1.5-2% cost to bank so why should we bear the cost in advance when the question is just for 90 days and such fluctuation in currency from Rs. 67 to Rs. 72 is not regular and once in a time. And if any fluctuation loss is incurred it is paid from the profits generated and our main focus is to maximize profits through product development and marketing and adding clients.

He also said that for sustaining in the long term, port based expansion is a must and they will any how complete that by March 2021 and will make operational till that date. For that matter land which is 6.5 km away from port is finalized and negotiation with Govt. will happen and will be closed within 3 months time and after that it will take 9 months to get environment clearance for setting up plant. Thus the commercial production can easily be achieved by end of F.Y. 2021 and entire capacity expansion will be done from internal accrual and for that total capex estimate will be out by year end i.e March 19.

With respect to fire incident he said the fire took place in the plant which was not operational and was due to reasons not known but have taken due diligence and  the entire plant was audited by its technological partner so that such incident don't take place again. He was busy with settling things at the Satnoor plant and getting it back to 100% capacity utilization and returned just few days back, this was the reason for postponing the Annual meet and keeping the 137 ktpa expansion on hault till anything clear emerged. Once the activity was normalized and the plant came back to 100% capacity he then announced the expansion will continue with delayed period of 3 months. He also mentioned that the loss was to the extend of Rs. 2 crore and will be received from insurance company but the loss of business for 1.5 month is the real loss but still we have a target of Rs. 1800 Crore sales for F.Y.19 and current quarter revenue will be Rs. 400+ Crore.

The new research center at Abu road will contribute a lot for maximizing profits and that in turn will build products for various industry application and that will add new customers.

From the total sales of ABS, 40% goes to automobile sector which is of a specialty grade and rest in other application ranging from consumer durable.

Mr. M.C. Gupta is also director to another company and a major player in EV and will identify opportunity for Bepl in that segment.

He also stated that as per the Global research, India's GDP shall increase by $220 Trillion by 2047 and per capita of India shall be $16000 and INR 70,000/- to 80,000/- shall be the purchasing power capacity per month of individuals.

The company has started trading its own raw material to the extend of 2000 to 3000 tons per month and are strategically developing a new market for their product which shall be taken up on a huge basis in future.